614 Garcia v. Genesis Crude Oil, L.P., 13-14-00727-CV, 2016 WL 1732436 (Tex. App.—Corpus Christi Apr. 28, 2016, no. pet.)

Richard F. Brown

The following is not a legal opinion. You should consult your attorney if the case may be of significance to you.

Garcia v. Genesis Crude Oil, L.P., 13-14-00727-CV, 2016 WL 1732436 (Tex. App.—Corpus Christi Apr. 28, 2016, no. pet.) (mem. op.) (Payment satisfies Division Order Statute), held that payment of suspended royalties plus interest before judgment will defeat a claim for attorney’s fees and statutory minimum damages. In 2012, Lessor sued Lessee for breach of multiple lease covenants. In 2013, division orders were issued. In 2014, Lessee suspended royalties related to the death of Lessor’s father. In 2014, Lessor amended the petition to seek unpaid royalties and statutory interest under the Natural Resources Code and a declaratory judgment as to Lessor’s right to unpaid royalties and interest under the Natural Resources Code. The pleading also sought attorney’s fees and the statutory $200 minimum damages under the Natural Resources Code. Apparently, all other claims were dropped. Lessee paid to Lessor all of the unpaid royalties and statutory interest. Lessee was granted a take nothing judgment on Lessee’s motion for summary judgment. The issue was whether Lessor was entitled to recover attorney’s fees and the statutory $200 minimum damages.

In summary, the Texas Division Order Statute provides that the payor is obligated to pay royalties on or before 120 days after the end of the month of first sale, payee must notify a payor of a failure to pay, payor then has thirty days to make payment, and a failure to timely pay triggers a right to interest at a statutory rate, statutory minimum damages of $200 and a right to recover attorney’s fees. Section 91.406 of that statute provides:

If a suit is filed to collect proceeds and interest under [Chapter 91], the court shall include in any final judgment in favor of the plaintiff an award of:

1. Reasonable attorney’s fees; and
2. If the actual damages to the plaintiff are less than $200, an additional amount so that the total amount of damages equals $200.

The court held that for a plaintiff to seek attorney’s fees or minimum damages under § 91.406, it must first prevail on a cause of action brought under Chapter 91. Because Lessee tendered full payment of proceeds and interest to Lessor, Lessor’s cause of action against Lessee failed as a matter of law.

Similarly, the court held that there was no justiciable controversy under the declaratory judgment act, nor for breach of contract under Chapter 37, Texas Civil Practices and Remedies Code.

The significance of the case is the holding that payment of suspended royalties, plus interest, before judgment will defeat a claim for attorney’s fees and statutory minimum damages.